Upwork (NASDAQ:UPWK) Could Easily Take On More Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Upwork Inc. (NASDAQ:UPWK) does carry debt. But should shareholders be worried about its use of debt?

We've discovered 2 warning signs about Upwork. View them for free.

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Upwork's Net Debt?

The chart below, which you can click on for greater detail, shows that Upwork had US$358.4m in debt in March 2025; about the same as the year before. However, its balance sheet shows it holds US$622.1m in cash, so it actually has US$263.7m net cash.

How Strong Is Upwork's Balance Sheet?

The latest balance sheet data shows that Upwork had liabilities of US$274.7m due within a year, and liabilities of US$371.0m falling due after that. Offsetting these obligations, it had cash of US$622.1m as well as receivables valued at US$77.9m due within 12 months. So it can boast US$54.3m more liquid assets than total liabilities.

This surplus suggests that Upwork has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Upwork boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Upwork

Better yet, Upwork grew its EBIT by 309% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Upwork can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Upwork may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last two years, Upwork actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case Upwork has US$263.7m in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of US$158m, being 159% of its EBIT. So we don't think Upwork's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Upwork you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.